Piper: Despite recent struggles, now a good time to own Apple stock

Apple has become a victim of its own success, but the company's growth rate will remain sustainable for the next four years, one prominent Wall Street analyst believes.

Gene Munster with Piper Jaffray issued a note to investors on Wednesday declaring that "now is a good time to own" AAPL stock. He said he's confident that the stock will continue its upward trajectory in the coming years, regardless of recent struggles.

"In many ways Apple is a victim of its own success in the eyes of shareholders," Munster wrote. "There are several reasons why some are concerned AAPL will not move higher, including ownership reaching maximum levels among key investors, tough growth comps over the next several quarters, and a lack of share appreciation following a significant beat in March.

"But we believe that the multiple will expand slightly as the Street gains confidence in sustainable growth of 25% or greater, new product categories, and new software announced at WWDC on 6/6 will serve as a catalyst in the future."

Among potential new product categories, Munster continues to believe that Apple will eventually enter the high-definition television set market, with its own high-end, connected TV offering direct access to iTunes content. He said Wednesday he believes Apple will launch a connected HDTV in the next 2 to 4 years, and restated his belief that the company could introduce such a product by the end of calendar year 2012 at the earliest.

As for the upcoming Worldwide Developers Conference starting on June 6, Munster believes that expectations for the event are "relatively low," because of numerous reports that Apple will not introduce new iPhone hardware as it has done in years past.

"But we believe the software features for the next version of iPhone software (iOS 5) and Mac software (OS X Lion) could exceed those low expectations, and may indicate new hardware features," Munster wrote. "additionally, there is always the 'one more thing'-factor that Apple could surprise the crowd with a new service or product."

Munster has conservatively modeled for Apple to grow 23 percent year over year in calendar year 2012. Beyond that, he expects Apple to grow its revenue in the high-20s percent range over the next four years.

While Apple's growth is projected to continue, the numbers presented by Munster are significantly less than the sky-high year over year figures Apple has posted recently. For example, in the most recent March quarter, the company's profits increased 95 percent to $5.99 billion.

But Munster said his projections in the high 20s are also "well ahead" of the long-term growth rate many investors assume for Apple. On Wall Street, the expectation is for the company's growth to be in the 15-to-20-percent range over the next four years.

Piper Jaffray has maintained its "overweight" rating for AAPL stock, as well as a price target of $554.

The uncertain factor with apple stock is, and will be in the future, Steve's health.

Steve's health is a cloud but it is mostly factored in. The fear that the world's second largest company by market cap can't grow much any more is a much bigger factor. Wall Street simply can't believe that Apple can continue growing earnings by 95%. They are pricing in around 15%. When Apple beats it repeatedly it will force up the stock price regardless of this sentiment.

Steve's health is a cloud but it is mostly factored in. The fear that the world's second largest company by market cap can't grow much any more is a much bigger factor. Wall Street simply can't believe that Apple can continue growing earnings by 95%. They are pricing in around 15%. When Apple beats it repeatedly it will force up the stock price regardless of this sentiment.

I have to think you are correct, that or Apple are victims of the best stock manipulation in history. It trades so far below where it should be as to be ridiculous.

I was going to say AAPL is like a cork held below water then I visualized the effect of letting go and decided to change the image to a hydrogen balloon held below water.

I'm not high-finance wiz, but wouldn't a stock split psychologically make Apple's stock feel cheaper and encourage smaller investors to buy it up, and then allow it to rise more? It's a mental glass-ceiling, isn't it? Getting 1 share for $334 today (disclosure, I own AAPL) seems a hefty buy where as buying 10 shares at $33.40 isn't such a leap. Apple doesn't give dividends, so the return for the shareholders is only in stock price - and a split doesn't cost anything, does it?

Steve's health is a cloud but it is mostly factored in. The fear that the world's second largest company by market cap can't grow much any more is a much bigger factor. Wall Street simply can't believe that Apple can continue growing earnings by 95%. They are pricing in around 15%. When Apple beats it repeatedly it will force up the stock price regardless of this sentiment.

Given that only 13% of the market has transitioned to smart phones, Piper's 30% yearly growth rate for the next 4 years is a laughable figure at best. Given the iPhone has been growing in the 100%-600% Y/Y rate in the previous quarters, thinking it is simply going to stop grabbing market share from feature phones is simply not a reasonable thought process.

I suspect Apple still has room to continue to grow at 50%->100% year over year for the next 3 years. This will land them with 15-25% market share in the phone world. Android users will call this "losing" since Android will have 35-50% market share.